Search form

Sorry U.N., Countries Are Poor Thanks to Bad Policy, Not a Lack of Cash

The Obama administration extolled its “leverage”
from foreign aid to Egypt only to demonstrate Washington’s
complete political impotence. Now a new study has found that the
United Nations’ celebrated Millennium Development Goals have
no effect on economic development.

It long has been evident that nations are poor because of bad
policies, not inadequate cash balances. Which makes economic
reform, not foreign aid, the key to growth. Unfortunately,
politicians continue to take money from poor people in rich
countries and give it to rich people in poor countries in the name
of development.

In 2000 government leaders adopted the United Nations Millennium
Declaration. Participants set a number of objectives—called
the Millennium Development Goals—for reducing extreme poverty
by 2015. The chief tool was expected to be foreign aid.

Along the way the UN established the Millennium Project
“to develop a concrete action plan for the world to achieve
the Millennium Development Goals and to reverse the grinding
poverty, hunger and disease affecting billions of people.”
The U.N. staged summits, produced reports, and adopted “a
global action plan.” Tens of billions of dollars were pledged
for the cause.

Few Americans would begrudge additional money for foreign
assistance if the outlays actually reduced poverty. However, the
record of more than six decades of financial transfers running in
the trillions of dollars—from the U.S., other nations, the
U.N., and other organizations, such as the multilateral development
banks—is failure. Foreign “aid” turned into
foreign hindrance, creating long-term dependency while reinforcing
self-defeating collectivist economic strategies and subsidizing
authoritarian political systems. The only correlation to growth
turned out to be reform, which is discouraged when aid relieves the
pain of failure.

Aid agencies eventually claimed to have learned from the past
and developed new, smarter approaches to uplift the poor. Hence the
Millennium Development Goals. The results, explained the UN,
indicated “unprecedented progress” and
“remarkable achievements.”

Since 2000 total assistance from industrialized states alone has
more than doubled, going from $53.9 to $125.6 billion last year.
Although overall aid occasionally dropped—it was down four
percent in 2012 over the year before—money from all sources
for the least developed countries rose steadily, even in the midst
of the 2008-2009 economic/financial crisis. Most LDCs are receiving
significantly more money today than a decade ago.

Nevertheless, Angel Curria, Secretary-General of the
Organization for Economic Co-operation and Development was
concerned. “As we approach the 2015 deadline for achieving
the Millennium Development Goals, I hope that the trend in aid away
from the poorest countries will be reversed. This is essential if
aid is to play its part in helping achieve the goals.” The
organization predicted that transfers would rise this year.

Not that the UN, OECD, or any national government believes its
work will finish in 2015. So the UN is working on another set of
objectives to be backed by even more money.

Last year the UN established a 27-member “High-Level Panel
of Eminent Persons on the Post-2015 Development Agenda.” In
May the group issued a report intended to “stimulate debate
over the prioritization that will be needed if the international
community is to agree to a new development framework before the
expiry of the Millennium Development Goals.”

Although there apparently was debate over the details of the new
objectives, there was no doubt about the U.N.’s development
record. The report began: “The Panel came together with a
sense of optimism and a deep respect for the Millennium Development
Goals (MDGs). The 13 years since the millennium have seen the
fastest reduction in poverty in human history.” While
economic growth and better policies also played a role, noted the
group, “it would be a mistake to simply tear up the MDGs and
start from scratch.” The goal now is to “finish the job
that the MDGs started” by “eradicating extreme poverty
from the face of the earth by 2030.”

That is a laudable objective. But no combination of U.N.
standards and international monies are likely to achieve that
result. It turns out the MDGs have not even reduced extreme
poverty.

The U.N. simply assumes the benefits of its activities, rather
like the term “foreign aid” itself. In fact,
government-to-government financial transfers would more accurately
be called “foreign hindrance.” Three years ago,
complained Ambassador Terry Miller, who served in various U.S.
roles at the U.N. before joining Heritage: aid funding
“creates strong constituencies for the current U.N.
development system. Absent from the process is any real measurement
of how U.N. development expenditures and activities affect the
lives of the poor.”

Dr. Howard Steven Friedman of Columbia University, also with the
U.N. Population Fund, has helpfully provided just such an analysis.
Earlier this month he published a working paper on the issue:
“Causal Inference and the Millennium Development Goals
(MDGs): Assessing Whether There Was an Acceleration in MDG
Development Indicators Following the MDG Declaration.” His
conclusion was sobering: “The general result was that there
was no trend in statistically significant accelerations in the MDG
indicators after 2000. Rather the results for all four sets of
reported analysis were consistent in that about half of the MDG
indicators exhibited no acceleration or deceleration during the
time period from 1992 to 2008 and about one-third exhibited
accelerations BEFORE 2001. Contrarily, nearly all of the control
indicators had no change (neither acceleration or deceleration)
during the time period.”

Friedman allowed the possibility that the announcement of MDGs
could have reflected previous efforts which generated the latter
four good results. Nevertheless, substantially increasing
MDG-related activities still should have generated a boost. After
all, as Friedman explained, “there was a demonstrable
increase in the amount of donor funding for development following
the MDG Declaration.” He noted that real outlays for
population programs alone jumped nearly five times.

Yet, concluded Friedman: “The data show clearly that the
activities following the MDG Declaration did not provide an
acceleration in most of the development goals. For the subset of
MDG indicators that experienced an acceleration, the accelerations
tended to occur before the MDG Declaration.” Which means
there is no evidence that the MDGs and the money behind them helped
the world’s poor.

If they served any purpose, it was as a political tool to loosen
purse strings in industrialized states. In fact, Friedman observed
that “The Millennium Development Goals succeeded at raising
the global awareness of investing in development,” and were
followed by “a demonstrable increase in the amount of donor
funding.” The Heritage Foundation’s Brett Schaefer was
blunter: “the most useful aspect of the MDGs for the
organization is not their impact on development, but rather the
public-relations benefits of being able to claim a central role in
the progress made in developing countries.”

Lest that seem overly cynical, the U.N. refused to publish Dr.
Friedman’s analysis. Spokeswoman Vannina Maestracci said that
the study “does not represent the United Nations or
UNFPA’s position.”

Yet what to make of the fact that poor nations are doing better?
Even Africa, which for many decades was racing in reverse, has been
making significant progress. For this we can thank the marketplace,
not structural economists, central planning, aid bureaucracies,
government-to-government transfers, and the MDGs.

Dirigiste economics died amidst persistent Third World poverty,
the collapse of communism, and exploding globalization. Socialism
lost its allure as African and Asian nations could not feed their
peoples. The India known for Gandhi and Nehru embraced the market.
Communist China and Vietnam tossed Marxist nostrums overboard.

Nations entered an ever wider global circle of exchange,
empowered by domestic economic reform and fueled by trade and
foreign direct investment. For instance, developing states
collected more than $700 billion in FDI last year. These funds fuel
growth which gives poor peoples new and better economic options.
The reform path was not always straight and simple, but it offers
hope of a better life to those once seemingly trapped in a world of
enduring poverty.

Of course, grave injustices persist in many of these lands.
Those with influence continue to manipulate political systems to
win economic favors. However, more often than not foreign aid turns
into yet another resource for the well-connected to exploit. Aid
encourages a further concentration of already dangerously
centralized power.

Rather than hope more international communiqués and funds
will eliminate poverty, Western states should reconsider policies
which hinder developing countries from taking full advantage of the
global marketplace. For example, protectionism, especially in
agriculture, is a costly barrier. Trade agreements which attempt to
impose unrealistically expensive environmental and labor standards
on what remain poor societies is another. Political
“aid” which strengthens regimes that, like Egypt,
actively hinder economic and political reform also impedes
development.

This doesn’t mean that no assistance program can ever
work. But even the most appealing of these initiatives—health
care, for instance—will be most effective if the economy is
growing and country is developing the ability to sustain new
endeavors. Indeed, Friedman found that the MDGs did not accelerate
even HIV treatment.

It long has been obvious that foreign aid is no panacea.
Friedman’s study reminds us that it is rarely possible even
with the best intentions to reach into other nations and
“fix” them.

Nevertheless, the cup again will be passed to cash-strapped
governments to fund the MDGs, and whatever replaces them in 2015.
Western peoples are generous when they believe their money is well
spent. But their governments should stop wasting people’s
hard-earned cash when the only result will be to add to the fiscal
tsunami threatening their children’s future.